If you have spent any time in the real estate business, you likely know by now that the appraisal process can be a nerve-wracking business for sellers. After all the work a seller does to list a home and field offers, someone now wants to peruse the house and determines its worth. In reality, an appraisal rarely ruins a prospective sale. To put your clients at ease, there are some additional myths that you as a realtor should appreciate about the appraisal process.
Myth # 1 – Appraisers Determine the Amount a Buyer Will Pay
In reality, the appraisal of a home is just one part of the pricing process. As such, some sellers even go so far as to hire multiple appraisers to provide prices. Rather than give you an exact price, an appraiser provides you with an opinion influenced by training and experience. The price that is provided by the best appraisals is often close to the market value of a home. This, however, is not always true. Banks often refuse to loan to buyers any more money than the home’s appraisal price. If the home is appraised for lower than the selling price, either the realtor or the buyer will need to determine a method to make up for this difference. Many times, such compromises occur.
Myth # 2 – Inspections are Different From Appraisals
Home inspections are vastly different from appraisals. The purpose of an inspection is to determine any issues that currently exist with the home and about which all involved parties should be made aware before the exchange of money. Appraisals, however, are designed to determine market value. During the appraisal process, your property will be compared to similar homes in the area to determine its value. While a home inspector looks for things like mold and foundation problems, an appraiser focuses on comparing the features of your property to other properties in the area.
Myth # 3 – Investing More in a Home Automatically Increases its Appraisal Value
One of the biggest myths that exist about the real estate process is that any investment a person makes to a home automatically adds value. In reality, many improvements do little to improve your home’s appraisal value and other improvements can lower a home’s value. Instead, your property’s market value is influenced by what people are willing to pay for it. What you saw as critical improvements to the property might not be viewed as such by the new owners. Sellers should always be aware that only certain types of improvements increase a home’s value.
Myth # 4 – Better Homes Result in Better Purchase Prices
Having the largest and best home in an area does not mean this will be reflected in the appraisal price. In reality, standing out too much can end up harming a property’s value. This is because the property’s value is determined based on the surrounding area. An appraiser will take other homes in the area into consideration before determining your home’s value. If your property is surrounded by lower-priced properties, the property’s value will naturally decrease.
Speak with a Knowledgeable Property Law Attorney
Property law is complex and can be difficult to navigate. If you need the assistance of an experienced property law attorney, do not hesitate to contact Adam Law Group today.